Emerging Managers to Invest in Headcount, FinTech to Speed Up Growth
To expand their companies in 2023, emerging alternative investment managers are placing a high priority on hiring top people and making investments in technology platforms and third-party data suppliers, according to a report from alternative investments fintech Dynamo Software.
“Increased internal headcount” was identified as the top area of investment to propel fundraising efforts over the coming 12 months in Trends, Challenges & Insights from Leading Emerging Managers, a report based on the results of a survey of leaders across the global emerging manager marketplace representing private equity, venture capital, hedge funds, corporate development, real estate, fixed income, small-cap public equity, and private credit.
Emerging managers do not appear likely to source fee earnings for additional funds to pay top staff, like their more established GP rivals. In surveys conducted by Dynamo in February and Emerging Managers in March, the same percentage of general partners (88%) said their fee schedule will not change during the following year.
The three main justifications for integrating technology are “creating efficiencies and optimizing workflows,” “overall cost,” and “empowering the entire team to leverage tech.” Operationally, “removing manual data tasks and introducing automated workflows” were prioritized as being the most important.
It’s not surprising that emerging managers said they won’t cut back on their IT budgets given the importance placed on data and FinTech. More than half (51%) anticipate a rise in their tech budgets during the upcoming year, while 48% predict no change.
The top three solutions for future inclusion in the emerging manager tech stack were “fundraising and marketing” solutions, “deal management and CRM”, and “investor relations.”
More than four out of ten (43%) Emerging Managers anticipate investors would raise ESG and DEI reporting expectations over the next 12 months, with estimates from Deutsche Bank, Bloomberg, and PWC that ESG assets will surpass $100 trillion in five years.